We made small revisions to our FY18-19E EPS (+1-2%), but raised FY20E by 9.5% for contributions from the Silat site. Our revised Target Price is based on a 10% discount to higher RNAV of SGD12.06. Maintain BUY. UOL is our top large-cap pick amongst Singapore property developers.

Expect stronger contributions in coming quarters

While 1Q18 net profit of SGD74m made up just 19% of our full-year forecast, we expect stronger recognition in the coming quarters after Amber 45 and Raintree Gardens are launched, and Park Eleven is completed.

Furthermore, earnings in the quarter were clouded by accelerated depreciation of Pan Pacific Orchard that ceased from Apr’18 onwards.

Potential doubling of pipeline

In an earlier note (UOL Group - Doubling Its Pipeline), we highlighted that UOL could potentially double its development pipeline with a GLS site at Silat Avenue. We assume that UOL will be awarded this site in the coming weeks and incorporate its contributions from FY20E. Unless its bid is below the government’s reserve price, we expect UOL to be awarded the site as it is the sole bidder.

We have built in a higher construction cost on guidance for the more costly PPVC construction method for this 56 storey development. Nonetheless, the project will have a significant SGD400 psf land cost advantage over nearby sites, which gives it substantial margin of safety when launching this project.

Higher ASPs in the East Coast

UOL will be launching Amber 45 at SGD2,200 psf, which is significantly higher than our original ASP of SGD1,900 psf. Accordingly, we raised our assumptions.

With this ASP revision, we also increased our assumption for nearby Nanak Mansion to SGD2,300 psf from SGD2,200 psf.

Swing Factors

Upside

Monetisation of property assets.

Rebound in home sales.

Unwinding or restructuring of cross-holdings in related parties like UOB, UIC and Haw Par.

Downside

Overpaying for land.

Poor execution of development projects.

Sharp increase in interest rates, which could dampen demand for properties and drive down asset prices.

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